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Can commodities traders really expect big payouts?

Most people will now be resigned to receiving a substantially lower bonus, but in commodity trading that may not be the case. According to an article in the Wall Street Journal, commodity desks could generate as much as a third of the net income at Goldman Sachs and Morgan Stanley this year.

Does this mean commodities traders will get paid? The Journal quotes Michael Karp, CEO of search firm Options Group, who says they’ll get paid flat at best. But flat looks very generous: last year Karp says top performers made $10-20m.

Whether banks will be able to avoid paying these sums again will depend upon traders’ negotiating position and ability to find alternative employment elsewhere.

Hedge funds may yet be interested. Many are said to be turning their backs on trading equity volatility, in favour of trading derivatives based on commodity indices. Utilities and oil majors are also hiring.

Jakob Bloch, managing director of recruiter Commodities Appointments, says banks’ ability to be flexible on bonuses may in any case be restricted by contractual agreements guaranteeing traders a proportion of their P&L. “Percentage deals became a lot more popular over the past few years as banks hired in more traders,” he says.

Others question this, however. Colleen Quilty, at Correlate Search, says percentage packages remain rare, and that although commodities teams have had a good year, bonus expectations are “humble”.

A senior trader at one European house confirms this: “Everyone understands that banks are having a very, very tough time. The game of musical chairs and jumping from one shop to another collecting big guarantees has stopped. People are just happy to have a job.”

Comments (10)

  1. banks cannot be seen to be rewarding employees too generouly when they are reeling and are letting peple go willy nillly. a reward for effort and a decent return is acceptable. in the u.k certainly there will be a storm from the press and public should this happen

  2. There is a lot of willy nilly out there right now………

  3. Get a grip. you make money, you get paid, you don’t make money, you don’t get paid. SIMPLE. Anyone who makes cash deserves a reward.

  4. Guys, did you see the BNP Paribas memo published this morning? Bonus pools are down 70%. And BNP is one of the big winners of the crisis….
    Nobody will be paid this year. Banks are cutting risk and deleveraging themselves. They do not care about successful traders because they want to reduce their risk exposure and the volatility of their revenues. That is the reality, sorry guys. It is time to sell your F40 and your houses in Mayfair.

  5. anyone who doesn’t make any willy doesn’t deserve any nilly!

  6. I know of a bank that is cutting it’s commodities trading desk…

  7. I find this article very difficult to believe and remain sceptical. While commodities were insanely good performers in the first half of the year, the sever correction over the past 2-3 months would have all but wiped out earlier profits. You would have had to have had impeccable timing to switch from long positions to short positions, as very few analysts expected such a severe correction…. while I have no doubt many did time this well, I cannot believe that even a majority of traders did…..

  8. ok, having read the source of this article, this is quite frankly pathetic journalism

    How a comment like
    “a small group of Wall Street traders on commodities, currencies and interest-rate trading desks ” translated into commodity traders in general getting big bonuses reflects the poor quality of the journalism

    Do efinancialcareers not have any editors??

  9. Hi Rapot,

    eFinancialCareers does have editors, and this article is not a misrepresentation of the article in the Wall Street Journal.

    The headline of the WSJ article was ‘Top Traders Still Expect the Cash’. That article states ‘Behind headlines of record losses, a small group of Wall Street traders on commodities, currencies and interest-rate trading desks have made huge profits for the banks that employ them. That is setting up a scramble as traders vie for dwindling pools of bonus money once heaped on such top performers.’

    This article is NOT stating that all commodities traders will get paid. It IS questioning whether the expectation of high pay is appropriate in commodities. This is reflected in the title.

    Sarah, Editor, eFinancialCareers Reply
  10. What does one do as a commodity trader? What subjects can one do to be a trader?

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